BiggerPockets

I'm trying to put together my first deal using our Self Directed IRA.

Our problem is we have no money for investing except what is in our SD IRA. I'm trying to find a way to use the SD IRA and be involved in a deal to receive part of the profits...we need to build up cash outside the SD IRA for future purchases. Is there a way to do this?

First, I get a loan and use the SD IRA for the down payment and fix. Won't work because the banks do not do non-recourse loans so the SD IRA requirements are not met.

Second, I understand that I can loan the money to anybody as long as they are non-disqualified (not a spouse, up line or down line)...using a promisary note. But how do I get a share of the profits?

Third, I also understand that I can loan the SD IRA to a business I'm affiliated with as long as it is 49% or less ownership...and the partner has to be a non-qualified individual and the managing member in the LLC. The SD IRA can NOT be used as collateral.

I feel like the stick man hitting his head on the wall over and over.

If anyone has information regarding investing with the SD IRA...I would greatly appreciate your input.

thx!

I'm trying to find a way to use the SD IRA and be involved in a deal to receive part of the profits

Stop right there. There's just no way to legitimately do this. If you receive any benefit as a result of a transaction your IRA does, its, by definition, a prohibited transaction. Performing a prohibited transaction will result in the entire IRA account being immediately and irrevocably distributed. You immediately owe all taxes and penalties due on the full amount.

You can get a loan in your SDIRA. Last I checked, 1st Bank is doing them. 65% max LTV. Keep in mind, though, that debt financed rental income is subject to tax even if its inside your IRA.

Matt,

Thanks for the tip. I'll have to look into that!

Thank you for all the great feedback and tips.

It looks like what I need at this point is an elephant!

Dan,

Yes...please. I would love to talk to someone that is using their SD IRA.

THANK YOU!

Peggy can you please follow me so I can send you info looks like the system does not allow for numbers on the posts

I just read old threads on the topic which were very helpful. I wrote out a more detail post which was erased so I'll just ask.

Please tell me who you use as your SDIRA administrator? I'm looking at Entrust.

Thanks in advance!

I really only looked at two different companies, Equity Trust and Entrust. I don't want to come across as a shill, but I thought Equity Trust was better across the board. They had lower initial fees than Entrust and they don't charge for check writing and other features that other custodians do. Maybe Entrust has changed things since then (I set mine up two years ago)?

Thanks for replying. I will check out both companies. At first I thought SDIRAs were overly complicated and a sure way of just tying up funds. I see it differently now. I have (2) 401ks just sitting and I'm thinking of rolling them over for the purpose of investing in deals outside of my own. I plan to sit down with a professional and go over details but it seems like a good way to invest towards retirement.

Elisha,

Something to keep in mind. Custodians become your IRA Mother. If they don't feel like doing something one day they don't have to let you and they don't have to be accountable to their changes.

And there seems to be some magic about being big. Two "big" IRA custodians have gone into receivership this past year. And in each case there were multiple problems with people that needed to get transactions done. By in large transactions go without a problem but there will come a day when you need to do something and it won't get done because something slipped or it was beyond their policy (not law). Look into being your own manager of your IRA and avoid needless fees and delays; your time is worth something and there is no sense in paying "aggravation" fees. And if the custodian gets into problems then you continue to do business as usual.

I'm sure there will be rebuttals to my comment from those who theoretically know what happens upon problems however, we solve them everyday!